Intraday Market Update
With no U.S. economic data on the docket today, the disclosure of firmer details of Europe's standby Greece bailout package is supporting sentiment, along with a bunch of merger related news. Greece got a promise of as much as 45 billion Euros in loans on Sunday from the Euro region and International Monetary Fund to help cover its financing needs and avoid default. The Euro appreciated versus all of its 16 most traded counterparts in mid-day trading, including gaining the most against the U.S. dollar in seven months. The cost of insuring Greek bonds against default fell sharply (-62 bps) to 364 bps.
The DJIA is trading above the psychologically important 11,000 level in mid-day trading, while the S&P 500 is trading near its highest levels since the Lehman Brothers bankruptcy in September 2008. Alcoa reports its Q1 results after the close today, officially kicking off earnings season. Analysts note that expectations are high for many companies, which could pose a downside risk for stocks. With the impressive rally in the indices over the past two months there are concerns that stocks could sell off on good earnings news, which occurred during last earnings season. The S&P 500 is approaching its 200-week moving average which is just under the 1,225 level. In addition, the 61.8% Fibonacci retracement level on the S&P 500 from its 2007 highs to its 2009 lows is 1,228.74 (see monthly chart below). These are important technical levels to watch in the coming days/weeks and may prove to be too much for the index to overcome, at least in the short term. I will be very surprised if the market does not have some sort of meaningful correction as it approaches these levels.
In equities, there have been many merger and acquisition rumors surface today. The most significant is military and defense contractor DynCorp International, which is being acquired by private equity firm Cerberus Capital for $17.55 per share in cash. Shares of DCP rose nearly +50% to the level of the offer. Halliburton is acquiring oil well services firm Boots & Coots for $3.00 per share in cash and stock. WEL is up +25%. Utility name Mirant entered into an agreement to merge with Reliant Energy over the weekend. In the financials, SunTrust is higher by +3% on news it is negotiating with private firm Henderson Group to sell off portions of its investment management business. Shares of PALM are up +16% on continued takeover speculation. Reports over the weekend indicated the firm is negotiating to sell itself to Asian firms HTC or Lenovo.
Commodities are mostly flat this morning with the exception of natural gas (-2.14%). Front month crude is below $85.00 per barrel while gold and silver are modestly higher by +0.28% and +0.43%, respectively. Gold traded as high as $1,171.40 but has retraced some of the gains and is now just under $1,160, which is just below its January 11 high ($1,162.20) which appears to be resistance. Copper is down -0.84%.
International markets were mixed on Monday. Winners in the Asia-Pacific region were led by Australia (+0.73%) and Japan (+0.42%). Losers were led by Korea (-0.82%), China (-0.51%), and Thailand (-3.64%).
European winners included Italy (+0.72%) and Spain (+0.58%). Other markets were relatively flat, including London and Germany.
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